Building relationships with our counterparts may serve our client's interests

Part 1 of this article (“Negotiation Ethics,” January 2012) generated the most commentary of any column I’ve published with InsideCounsel. Readers’ emails in response to the hypothetical reflect their struggle to serve the clients’ best interests while managing the ethics of negotiations. The hypothetical places you at a negotiation table with your business partner and your customer’s counterparts. During a break, your business partner tells you that important cost data developed and used by the customer to establish its position on price is incorrect and permits your company toextract a higher price. When you rejoin the meeting, the customer’s in-house counsel innocently states: “Unless I’m missing something, this looks like a win-win result.” Quickly, your business partner interjects that the deal looks good to him. The customer’s counsel looks to you for confirmation. I asked readers to share how they would respond.

Briefly, the Model Rules of Professional Conduct require a lawyer to be truthful when dealing with others on a client’s behalf.

The responding readers share the desire to serve the client’s best interests but diverge on the approach. Some say the attorney had no duty to correct the adversary’s mistake, and doing so would be an affront to the client’s interest. Others said the client’s best interest was served through creating and preserving longterm relationships, regardless of what our code may permit. I offer this illustration from a friend:

“One of the first transactions I negotiated in the mid-1990s was with a large company located in Ohio. Our team consisted of me and a sales rep who was hungry for a commission. On the customer side was about a half-dozen people, including a senior attorney based in New York. I’ll call him Mark.

“During the morning negotiations, the process was incredibly painful. Mark was being overly aggressive to impress his client, employing sarcasm, yelling and various rude behaviors. Right before lunch, we were negotiating my company’s obligations regarding indemnification. Mark demanded that we make a change, slapping his hand on the table for emphasis. I tried to discuss it with him because the change made no sense and was actually contrary to his client’s interests. Unfortunately, Mark would not consider any discussion. To cool things off, we agreed to break for lunch.

“I realized Mark did not understand anything about IP law or indemnification, and that the best thing for my client in the short run would be to agree to the requested revision. But an equally important issue for me was whether this was the right thing to do from a customer perspective. This was a foundational deal for a new and potentially large client opportunity.

“Before we returned back to our meeting, I intercepted Mark away from any of our respective clients. I patiently explained why the language in our proposed contract was appropriate and why his proposed change was actually against the interest of his clients. He finally understood and said ‘thanks.’ The remaining day of negotiation was positive and uneventful.

“By having that conversation, I had established credibility and trust in the eyes of my counterpart, and, it extended through many future negotiations. In fact, about five years later, an attorney in my company was negotiating an agreement with Mark. Before he even looked at it, Mark called me and asked whether it was a fair contract and whether he could trust the attorney.”

This story reminds us that building strong relationships with our counterparts may serve our client’s long-term interests. As one reader wondered: “What would happen if the customer finds out that his vendor was not forthright with him? Short-term win, long-term loss.”

Brian Martin is SVP and general counsel of KLA-Tencor Corp. Send your comments and best ethics practices to him at insideethics@gmail.com.